A:

Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people will not sell a security (asking price) for lower than the price they are willing to pay for it (bidding price). So, because there is more than one method of quoting the bid and ask prices of T-bills, the quoted ask price may simply be perceived as being lower than the bid.

For example, one common quote that you may see for a 365-day T-bill is July 12th, bid 5.35%, ask 5.25%. At first glance, the bid seems higher than the ask, but upon further inspection, you can see that the ask is actually higher. The reason is that a T-bill is a discount bond and these percentages are the quoted yields, not the actual prices. So, if we convert the bid and ask discount yields into the dollar amounts of the prices, we get a bid of $94.65 and an ask of $94.75. Therefore, the bid is actually lower than the ask. Sometimes the quotes on T-bills show the actual prices, in which case you don't have to convert or calculate anything. The same T-bill above, therefore, may be quoted with a bid of 94.65 and an ask of 94.75.

So, as the dollar amount of the bid should be lower than the ask, the bid's quoted yield percentage should be higher than the ask's quoted yield percentage - the two different kinds of quotes are just different ways of saying the same thing.

RELATED FAQS
  1. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
  2. How do day traders capture profits from the difference between bid and ask prices?

    Discover how day traders capture profits from the difference between bid and ask spreads. These spreads blow out during volatile ... Read Answer >>
  3. What is the difference between a quote driven market and an order driven one?

    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
  4. How are treasury bill interest rates determined?

    Find out why interest rates for U.S. Treasury bills are determined at auction and how so-called "competitive" bidders impact ... Read Answer >>
Related Articles
  1. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  2. Investing

    How To Read A T-Bill Quote

    If you want buy and sell US Treasury bills, you need to learn to read the quotes.
  3. Investing

    The Basics Of The T-Bill

    The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
  4. Investing

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  5. Investing

    Understanding Stock Quotes

    All you need to know about understanding stock quotes.
  6. Trading

    The Basics of the Bid-Ask Spread

    Successful traders must be aware of the difference between the bid price and the asking price of a security.
  7. Personal Finance

    Illegal Interview Questions To Watch Out For

    If you were ever asked any of these questions during an interview you shouldn't have been, because they are illegal.
  8. Investing

    Explaining Dutch Auction

    A Dutch auction is a public offering auction.
RELATED TERMS
  1. Best Bid

    The highest quoted bid for a particular trading instrument among ...
  2. One-Sided Market

    When the market for a security only shows either one bid or one ...
  3. Treasury Bill - T-Bill

    A Treasury Bill (T-Bill) is a short-term debt obligation backed ...
  4. Bid Price

    The price a buyer is willing to pay for a security. This is one ...
  5. Bid Size

    The number of shares being offered for purchase at a specified ...
  6. Firm Quote

    A price quote on a security, made by a dealer or market maker, ...
Hot Definitions
  1. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  2. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  3. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  4. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  5. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
  6. Dilution

    A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur ...
Trading Center